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Weekly outlook

Corn prices

[JUNE 17, 2003]  URBANA -- Although uncertainty still surrounds the 2003 corn growing season, producers face decisions about pricing the 2003 crop, said a University of Illinois Extension marketing specialist.

"Two general alternative approaches might be considered," said Darrel Good. "One is the purchase of put options in order to protect the current price level and partially benefit from higher prices should they occur. If higher prices do develop, producers would then have to decide when to price the crop.

"A second approach is to spread sales of a portion of the expected crop during the summer growing season in order to capture the average price."

Good's comments came as he reviewed the outlook for corn prices in the growing season and beyond.

"It is generally accepted that the development of the U.S. corn crop is the most important price factor at this time of year," he said. "That seems to be the case again this year, with recent price volatility at least partially explained by changing weather conditions, weather forecasts and crop condition ratings."

As of June 8, the USDA reported 91 percent of the U.S. corn crop planted, compared with 88 percent last year and the five-year average progress of 94 percent. The slowest progress, on a statewide basis, was in Pennsylvania, and progress was slower than average in Indiana, Kentucky, Michigan and Wisconsin. As of June 8, 69 percent of the crop was rated in good or excellent condition, and only 6 percent of the crop was rated in poor or very poor condition. The ratings of a year ago were 59 percent good or excellent and 9 percent poor or very poor.

"Recent precipitation along with higher temperatures should result in continued improvement of crop conditions," said Good. "The short-term precipitation and temperature forecasts are also generally favorable for crop development.

"Without widespread concerns about crop progress, corn prices will have a tendency to drift lower, unless there are other positive price factors."

In the near term, the market will examine the USDA acreage and grain stocks reports to be released on June 30 to see if there are any surprises relative to planted acreage or June 1 inventories. Based on known use to date and USDA projections for the year, June 1 corn inventories should be near three billion bushels, well below the 3.6 billion bushels of a year ago.

"The relative strength of cash corn prices in recent weeks in the face of a slow export pace gives the impression that corn stocks are tighter than the calculations suggest," said Good. "Perhaps the strong basis just reflects reluctance of producers to make large sales of old crop corn. The June 30 grain stocks report should provide some answers."

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Longer term, corn prices will be influenced by developments in Chinese corn production and the magnitude of Chinese corn exports, Good noted. Even with modest-sized crops, China has been an aggressive exporter of corn for the past two seasons. In 2001-02, the Chinese corn crop was estimated at 4.49 billon bushels, and marketing year exports totaled 340 million bushels. The 2002 crop is estimated at 4.775 billion bushels, and marketing year exports are projected at 530 million bushels.

For the 2003 crop year, the USDA estimates Chinese production potential at only 4.645 billion bushels, down about 160 million bushels from the May estimate. Chinese corn exports during the 2003-04 marketing year are projected at 315 million bushels. The 215-million-bushel expected decline in Chinese exports is the main reason the USDA is projecting a 250-million-bushel increase in U.S. corn exports during the 2003-04 marketing year.

"Most of that increase would likely be in shipments to South Korea," said Good. "If current unfavorable weather conditions result in an even smaller Chinese corn crop, U.S. export prospects might be enhanced further."

Beyond the 2003-04 marketing year, Chinese production and trade policy will continue to be important. It appears that China will attempt to expand soybean production, at the expense of corn production, to help meet its growing appetite for soybean meal and oil. Smaller corn crops and the elimination of export subsidies could result in further declines in Chinese corn exports over the next few years. Some analysts even expect China to become a modest net importer of corn in the near future.

"For now, it appears that corn prices will continue in a choppy but generally sideways pattern," said Good. "December 2003 corn futures have traded in a range nearly 20 cents since early May, but prices have stayed within the trading range established since September 2002. The high in September was $2.60 -- nine cents below the contract high -- and the contract low established in March 2003 was $2.305.

"If crop conditions remain favorable, the contract low would likely be challenged, particularly if speculative traders give up the long side of the market. It is a little early, however, to conclude that the 2003 crop is out of danger."

[University of Illinois news release]

[JUNE 16, 2003]  The Olympia FFA Alumni Chapter met on June 5 at Olympia High School, Stanford. Members enjoyed a cookout, which was followed by the chapter meeting. The vice president, Jeff Springer, presided.

In old business, Heather Obert and Chris Embry Mohr reported on various ag-related activities that have taken place over the past year, including the recent Ag Day event at Olympia High School, where students from grade schools within the district learned about the agriculture industry.

In new business, Brian Springer reported on various activities of the student FFA chapter.

The group also discussed the FFA Section 9 Fair, Minier Corn Daze and the FFA Alumni Chapter banquet. The alumni decided to work with the student chapter in helping cook rib-eye sandwiches at the Minier Corn Daze in August. The alumni banquet, tentatively scheduled in January 2004, will consist of a meal, silent auction and possibly a live auction. The chapter also decided to look into purchasing a new grill.

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Chapter officers for the alumni group are Todd Wibben, Atlanta, president; Jeff Springer, Minier, vice president; David Deal, Danvers, secretary; Jeff Schneider, treasurer; Kyle Haning, Delavan, reporter; and Melvin Springer, Armington, member at large. The chapter is under the direction of Chris Embry Mohr and Heather Obert, vocational ag instructors.

[Provided by Kyle Haning]

Consumers are the last line of defense against food-borne illness

[JUNE 16, 2003]  URBANA -- Sanitation and hygiene on the farm, in the food plant and in the kitchen are the best defenses against food-borne organisms that cause illness, said Susan Brewer, an expert on food safety at the University of Illinois.

Brewer knows that meat-processing plants are heavily regulated and that other food producers must comply with FDA's good manufacturing practices. She also knows that "even in the best of circumstances, some things are going to slip through the system. When the product is in the consumer's hand, he should exert whatever control he can over that product," she said.

"With raw agricultural commodities, you have to assume that contamination came in with the product from the farm. These organisms are ubiquitous. They're everywhere in the environment," said Brewer.

"In a couple of states, vegetables have been irrigated with municipal waste water. Companies have hired people to pick vegetables, but they don't have toilet facilities in the field. In these instances, you can have contamination from human waste, not livestock waste," Brewer said.

"There have been a number of outbreaks of food-borne illness from cabbage to strawberries to parsley to cilantro -- not products you'd normally consider sources of these bacteria. They're raw products, and people eat them raw. Unfortunately, most people don't wash them well either," she said.

In the meat industry, a USDA inspector must be on the premises any time animals are being slaughtered, Brewer said. "Sanitary handling of carcasses is very strictly defined and monitored. After slaughter, carcasses are washed with hot water or food-grade acid, or they are pasteurized in a steam cabinet to reduce contamination. The inspector keeps a close eye on who's doing what as they move around the plant. If someone works in slaughter, he's not supposed to be in the processing room."

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Brewer finds this monitoring reassuring not only because it enforces sanitary procedures, but also because it enhances plant security. "In many food-processing plants, unless you work for them, you won't get in there. And they're getting much stricter about who they're hiring. They have a lot to lose if something goes wrong."

Ground meat can be a particular problem because grinding distributes any contamination that has occurred throughout a lot of surface area. A pound of ground beef may contain meat from a few dozen cattle.

Brewer recalled one E. coli outbreak at a fast-food restaurant in Seattle. "A few animals that were positive for E. coli went into the processing facility, and the meat from those animals was ground and mixed together with meat from a lot of other animals. It's unclear what happened as the processed meat went through the distribution chain, but we know at the end point, it was not properly cooked. Proper cooking takes care of a lot of errors that accumulate along the way."

Brewer recommends using a meat thermometer even when cooking hamburgers to make sure meat is heated internally to 165 F. "It's a very bad idea to eat a rare hamburger. And if you're served one at a restaurant, if it doesn't look right or smell right or if it isn't hot, don't accept it. You don't know how long it's been sitting at that temperature or if it was ever really cooked," she said.

"There is no such thing as zero risk when you're dealing with a fresh commodity. If consumers want a sterile meat product, they will have to buy canned Spam," she said.

[University of Illinois news release]

Tornado damage to crops

[JUNE 9, 2003]  With several tornadoes going through the county about a week ago, it is certainly easy to see the destruction. Many people have lost their homes, others have lost property, some have lost portions of crops, but luckily no one was hurt seriously. After the cleanup of outbuildings and homes, the attention turned to assessment of crop fields.

Cornfields were the most obviously damaged. Corn was much larger, and now there is a large bare (or soil-blown) area through fields where tornadoes were on the ground. The field assessments I made showed about 25 percent of the cornfields needing some replanting done. This was because those fields mostly had corn that was broken below the growing point. The other 75 percent of the fields were probably good enough to leave them. Of course there was some yield loss due to lost plants and missing leaves, but the penalty for late planting would about equal a stand of 14,000 plants left from the earlier planting. Most fields had at least that many plants.

Some recent research has shown that there may be a little more yield loss than charts show, but there certainly isn't a guarantee on replanting either. Miraculously the plants had already begun to regrow within three days.

Soybeans were a completely different situation. Many soybeans that were above ground were completely cut off. When cut low, soybeans are dead. There is really nothing left to regrow. With the late planting, there was a saving grace. That was that many beans were still below the soil surface and therefore protected. My estimates were that a third of soybean fields needed some replanting done.

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[Tornado-damaged corn]

When the big picture is in, crop damage was minimal. I estimated about a quarter of a million dollars in crop damage. When we start looking at well over a hundred million dollars worth of crops grown annually in the county, it isn't an overall large percentage. It is however very significant to producers in the tornado paths. Crop losses of any kind make a rather meager income even less. Replant costs approach $50 per acre. Also, in the case of cornfields, there were herbicides applied already, which prohibited switching to soybeans that wouldn't be affected as much by late planting.

The damage to ornamentals was also very large. If you need assistance with evaluating fields or ornamentals after the storms, you may contact me at the Extension office for assistance. The number is 732-8289 or e-mail fultonj@mail.aces.uiuc.edu.

With about three years passing, there is a revised set of operation cost charts available. These costs are often referred to as "custom rates." These charts may be accessed at the U of I farmdoc website at http://www.farmdoc.uiuc.edu/manage/
machinery/cost_estimates.html.

[John Fulton]

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